Thursday, June 26, 2008

Median Home Prices Have Risen 3 Straight Months

WSJ reports that"Home resales rose to a 4.99 million annual rate, a 2.0% increase from April's unrevised 4.89 million annual pace, the National Association of Realtors said Thursday. The median home price was $208,600 in May, down 6.3% from $222,700 in May 2007. The median price in April this year was $201,200 (see chart above).

High inventories have exerted downward pressure on prices. The decline has kept would-be buyers from signing off on property as they wait for still-lower price tags."Reuters reports that "The housing market has been shaken for months by a credit crunch and a wave of failing home loans that have spooked lenders and prospective buyers.

The disappointing new homes data is nonetheless in line with the pace of the last eight months, which have seen sales hover around the 5 million level, said Paul Bishop, a senior economist with the National Association of Realtors."

MP: Aren't these reports missing the following seemingly good news: After declining for 7 out of the last 8 months, median home prices have increased for 3 months in a row, and the median price of $208,600 in May was 6.65% above the $195,600 level in February (data here)?

ANON 12:31: Yes, but the seasonal pattern is for home prices to fall between February to May, not RISE like this year. At least this is the case for median prices of new homes, data available from the Census. In 6 of the last 7 years, median new home prices fell between February and May. I don't have historical data for existing home sales from the Realtors.

40% fewer homes are being sold and my wild ass guess is that lower and middle income earners aren't buying starter homes in this period of well publicized economic uncertainty.

So it makes sense that Median Home Prices are rising.

As a matter of fact if you look at real estate markets neighborhood, by neighborhood throughout the country over the last 50 years (as I have done) you'll find the same trend for this stage of the real estate market.

The reason the Case-Shiller housing price index was developed is that the house prices reported by the Realtor group is so frequently distorted by changes in the composition of homes sold that virtually every housing expert considers it essentially useless.

Historically home builders dropping out of the low end of the market in hard times was such a consistent pattern that the ratio of new to existing homes -- the ones not distorted as much by changing composition -- prices actually turned out to be a good leading indicator of the relative performance of the S&P index of housing stocks. However, it has not worked this cycle.

Although other comments are correct in saying that median prices increase every spring, this is the first time in 3-4 years that it has been been combined with an increased year over year sales volume. The fact that median prices can increase even though sales quantites have jumped so dramatically is good news. The bigger test will be July, in the past 4 years, we have seen seasonal increases April thru June, but hasn't held up substantially through July. http://buyingafterthebubble.blogspot.com